The Union cabinet on Wednesday approved a government procurement policy that would mandate preference to local goods and services. The policy is meant to promote the ‘Make in India’ initiative.
The ministries of steel, oil and gas and telecom have announced purchase preference policy to support domestic manufacturing. The finance ministry has already made requisite changes to the General Financial Rules to create an enabling provision for this policy. Local content can be increased through partnerships, cooperation with local companies, establishing production units in India or joint ventures (JV) with Indian suppliers, increasing the participation of local employees in services and by training them.
Under the policy, preference in government procurement will be given to local suppliers whose goods or services meet prescribed minimum thresholds (ordinarily 50 per cent) for local content. In procurement of goods for Rs 50 lakh and less, and where the nodal ministry determines that there is sufficient local capacity and local competition, only local suppliers will be eligible. For procurements valued at more than Rs 50 lakh (or where there is insufficient local capacity or competition) if the lowest bid is not from a non-local supplier, the lowest-cost local supplier who is within a margin of 20 per cent of the lowest bid, will be given an opportunity to match the lowest bid.
If the procurement is of a type that the order can be divided and given to more than one supplier, the non-local supplier, who is the lowest bidder will get half of the order and the local supplier will get the other half, if it agrees to match the price of the lowest bid. If the procurement cannot be divided, then the lowest cost local supplier will be given the order if it agrees to match the lowest bid.
Small purchases of less than Rs 5 lakh are exempted from the policy. The order also covers autonomous bodies, government companies and entities under the government’s control.
As per an estimate, the combined value of annual procurement by central and state governments work out to Rs 5-7 lakh crore. The policy lays down a procedure for verification of local content relying primarily on self-certification. There will be penal consequences for false declarations. In some cases, verification by statutory and cost auditors will be required. A standing committee in the department of industrial policy and promotion (Dipp) will supervise implementation of this order and issues arising there from, and make recommendations to nodal ministries and procuring entities. Meanwhile, the cabinet committee on economic affairs (CCEA) decided to increase fair and remunerative price (FRP) of sugarcane by Rs 25 per quintal to Rs 255 for 2017-18 season beginning October. The FRP is the minimum price that sugarcane farmers are legally guaranteed.
